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CS Professional · Compliance Management, Audit and Due Diligence · Non-Compliances, Penalties and Adjudications

Nirmal Textiles Ltd received a notice from an adjudicating officer proposing a penalty for a default. Before passing the order, the officer wishes to proceed straight to imposing the penalty because the default is admitted in the company's reply. What does the Act require?

The adjudicating officer must give a reasonable opportunity of being heard to the company, the officer in default or any other person concerned before imposing any penalty. The Act makes no exception for admitted defaults or for penalty amounts.

  1. ANo hearing is needed where the default is admitted
  2. BA reasonable opportunity of being heard must be given before any penalty is imposed, to the company, the officer in default or any other personCorrect
  3. CA hearing is needed only for the company, not for the officer in default
  4. DA hearing is needed only if the penalty exceeds five lakh rupees

Explanation

Section 454(4) states that the adjudicating officer shall, before imposing any penalty, give a reasonable opportunity of being heard to the company, the officer in default or any other person. There is no exception for admitted defaults or a monetary threshold.

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